Entitlements Not Adequately Addressed In Budget, Says Economist

By Mario Trujillo

President Obama’s budget as well as the Republican proposals do little to curb U.S. debt, not addressing the largest problems — Social Security and healthcare costs, said Peter Morici, former Chief Economist at the U.S. International Trade Commission.

“Without curbing spending in those areas, there is simply no way out of Washington’s fiscal mess,” Morici wrote in an op-ed. He is currently a professor at Smith School of Business at the University of Maryland.

President Obama’s newly released $3.73 trillion budget cuts about $33 billion this year, a majority from domestic discretionary spending. It shows a $1.6 trillion deficit for 2012 and adds $7.2 trillion through 2021.

According to the Congressional Budget Office, discretionary spending makes up about 20 percent of the budget. Social Security takes up about 21 percent and healthcare about 27 percent.

While Social Security is not currently adding to the deficit due to a trust fund, by 2018 funds will run out with the increase with the retirement of many in the baby-boom generation, Morici said. 

He suggested raising the retirement age to 70 for those under 55, saying  people live, on average, 14 years longer than when Social Security was first put in place.

Using Germany as a model for healthcare, Morici said the U.S. should cut drug prices, doctor’s salaries and overhead paid to hospitals and private insurance companies, also mentioning malpractice reform.

Germany also has a mandatory private insurance policy. Germany spends 12 percent of its GDP on healthcare while the U.S. spends 19 percent, Morici said.